Kennedy Wilson Sells Two Multi-Family Properties for $154M

By Nicholas Ziegler, News Editor

360 Residences in San Jose

Kennedy Wilson has shed two multi-family assets for a total of $154 million, the firm reported yesterday. Net proceeds of $64 million will be distributed to the company and equity holders, with $18.5 million reserved for the firm. The two assets, 360 Residences in San Jose and Arbor Creek Apartment Homes in Beaverton, Ore., were sold to two separate buyers at an average cap rate of 4.5 percent.

The firm first acquired the deed to 360 Residences in November 2010 and spent $2 million on a rehab effort, stabilizing the property at 97 percent occupancy by the time of sale. “The goal was to complete and then stabilize the asset, and we took 360 from a note to an income producing apartment building in ten months,” Robert Hart, president of KW’s multi-family management group, said.

“Rarely do truly iconic assets like 360 Residences come to market, especially in infill locations with high barriers to entry and severe supply constraints,” Stan Jones, executive vice president of investments with Institutional Property Advisors, said. “The property’s prime downtown location in one of the strongest job markets with arguably the best demographics in the United States attracted numerous institutional buyers.” IPA, a division of Marcus & Millichap Real Estate Investment Services Inc., helped arrange the San Jose sale.

The firm also noted that the net operating income of Arbor Creek has improved by 22 percent since 2010, and that Kennedy Wilson has performed significant upgrades to the property.

KW has been looking more at the finance side of the industry in its last few transactions. In early March, the firm partnered with Fairfax Financial Holdings Ltd. to form a $365 million joint venture to seek assets, loans and property in Europe. The week prior, KW acquired research-and-consulting firm Meyers Research L.L.C. and sold a 14-story luxury multi-family building in Los Angeles for $74 million.

While it’s no secret that the multi-family sector remains attractive to investors, a 2012 outlook report by Marcus & Millichap Real Estate Investment Services Inc. showed that the pace of investment is unlikely to slow anytime soon. “The fourth-quarter (apartment) vacancy rate measured 5.2 percent, representing a 40-basis-point decline from the third quarter and a sharp drop of 140 basis points from just a year ago,” the report noted. “Effective rents now meet or exceed their prior 2008 peaks in many markets.”